IRS warns only some can benefit from filing property taxes early ahead of new law

[Amica Nostra 4,803]

http://abcnews.go.com/US/irs-warns-benefit-filing-property-taxes-early-ahead/story?id=52026025

 

In the wake of the massive Republican overhaul of the tax code, filers in some states have been scrambling to submit their property taxes to take advantage of the dwindling deductions before year's end.

 

Add Interest

But the IRS is saying not so fast...at least for some.

The reason for the rush is that the new tax code limits the amount of state and local taxes that people can deduct on their federal returns. That is expected to cost some homeowners in high-tax states like New York and New Jersey thousands of dollars.

In a statement Wednesday, the IRS said that in order for deductions to be allowed on taxes that are paid in 2017 ahead of the 2018 deadline, the taxes must be assessed as well before the end of the year.

[Voice of Reason 10,298]

Yeah, kind of hard to pay your tax bill prior to GETTING your tax bill.  Perhaps if they were to include a provision that someone with $xxxx amount or more can deduct it on their tax returns.  Some places in the NE have more property taxes annually than other states charge for a mortgage.  Cannot understand why individuals move to those locations and buy property, but they do.

[Amica Nostra 4,803]

2 hours ago, IDWAF said:

Yeah, kind of hard to pay your tax bill prior to GETTING your tax bill.  Perhaps if they were to include a provision that someone with $xxxx amount or more can deduct it on their tax returns.  Some places in the NE have more property taxes annually than other states charge for a mortgage.  Cannot understand why individuals move to those locations and buy property, but they do.

But why double tax folks for paying state taxes at all? 

[bcking 3,157]

3 minutes ago, Il Mango Dulce said:

But why double tax folks for paying state taxes at all? 

"Double taxation" is only wrong when it applies to rich dead people's money. Obviously.

Edited December 28, 2017 by bcking

[Voice of Reason 10,298]

2 hours ago, Il Mango Dulce said:

But why double tax folks for paying state taxes at all? 

Not sure what you mean?

[Italian_in_NYC 259]

Not a single of the HUNDREDS of articles I read on this mentions that it is totally USELESS to prepay any State or Local Tax if you are in the AMT (and if you have a large bill, chances are you are in the AMT).

What a shame!

[Amica Nostra 4,803]

1 hour ago, Italian_in_NYC said:

Not a single of the HUNDREDS of articles I read on this mentions that it is totally USELESS to prepay any State or Local Tax if you are in the AMT (and if you have a large bill, chances are you are in the AMT).

What a shame!

https://www.irs.gov/newsroom/irs-advisory-prepaid-real-property-taxes-may-be-deductible-in-2017-if-assessed-and-paid-in-2017

 

 

[Amica Nostra 4,803]

2 hours ago, IDWAF said:

Not sure what you mean?

There is a cap on the deductibility of state and local taxes in the new tax law. It is possible that some folks with high income tax and a pricey property would exceed the 10k limit. In that case they would be paying taxes with money that has already been taxed.

[Italian_in_NYC 259]

2 minutes ago, Il Mango Dulce said:

https://www.irs.gov/newsroom/irs-advisory-prepaid-real-property-taxes-may-be-deductible-in-2017-if-assessed-and-paid-in-2017

 

 

Doesn’t mention the AMT.

This is the IRS saying that property taxes may be deductible if paid and assessed during 2017, which was quite obvious.

What no one is saying is that in most cases the SALT deduction has no real tax benefit because the AMT kicks in and adds back all those deductions.

For example, I’ll be better off deducting $10,000 with no AMT kicking in than deducting $40k/$45k state and local taxes all added back to the AMT calculation.

[Amica Nostra 4,803]

1 minute ago, Italian_in_NYC said:

Doesn’t mention the AMT.

This is the IRS saying that property taxes may be deductible if paid and assessed during 2017, which was quite obvious.

What no one is saying is that in most cases the SALT deduction has no real tax benefit because the AMT kicks in and adds back all those deductions.

For example, I’ll be better off deducting $10,000 with no AMT kicking in than deducting $40k/$45k state and local taxes all added back to the AMT calculation.

We may be talking about a corner case, but where does that AMT for a couple kick in?

[Italian_in_NYC 259]

Just now, Il Mango Dulce said:

There is a cap on the deductibility of state and local taxes in the new tax law. It is possible that some folks with high income tax and a pricey property would exceed the 10k limit. In that case they would be paying taxes with money that has already been taxed.

Those taxpayers are most likely in the AMT so they really get no tax benefit from most SALT deduction.

and by the way, it is not double taxation as Federal and State are different jurisdictions.

It is about time that the Federal Govt stops subsidizing high-tax States. CA and NY have over bloated budget.

[Italian_in_NYC 259]

Just now, Il Mango Dulce said:

We may be talking about a corner case, but where does that AMT for a couple kick in?

Typically $180k-$800k.

So chances are that couples with a SALT deduction over $10k are in the AMT.

People who would have got killed by this are people ABOVE that range, and that’s why they lowered the top bracket from 39.6% to 37%. It’s basically a wash in high-tax States (but it’s great for millionaires in Florida or Texas).

2 minutes ago, Il Mango Dulce said:

We may be talking about a corner case, but where does that AMT for a couple kick in?

It’s not a corner case. The AMT hits almost everyone with a SALT bill over $10k

[Voice of Reason 10,298]

3 hours ago, Il Mango Dulce said:

There is a cap on the deductibility of state and local taxes in the new tax law. It is possible that some folks with high income tax and a pricey property would exceed the 10k limit. In that case they would be paying taxes with money that has already been taxed.

Double taxed?  Are you serious, or just trying to get a rise out of folks?

 

I pay taxes on all my income at the federal level. Then I pay state, city, and county taxes with that already taxed money for just about everything I buy.  Vehicle registration, sales tax, etc.  I pay federal taxes on my cell phone bill.  And don’t get me started on the racket that surrounds selling a used car and having to pay taxes on it again and again and again.

 

Federal and state/county/local taxes are different one from another.  

 

In your example, they are not “paying taxes with money that has already been taxed”.  They are just paying the additional amount of taxes they owe that weren’t deducted throughout the year.

Edited December 29, 2017 by IDWAF

[charmander 692]

I paid my '18 Q3&Q4 taxes this morning. Virtually no line at my office, in and out in 10 mins. My city's average property tax is just shy of $4K. Maybe that's why there was no line. My neighboring towns are wealthy bedroom communities, one's average prop tax is $11.5K. Probably long lines there.

[Italian_in_NYC 259]

44 minutes ago, charmander said:

I paid my '18 Q3&Q4 taxes this morning. Virtually no line at my office, in and out in 10 mins. My city's average property tax is just shy of $4K. Maybe that's why there was no line. My neighboring towns are wealthy bedroom communities, one's average prop tax is $11.5K. Probably long lines there.

Someone with a property tax bill over $10k (and likely with a state income tax at least as big if not more) is totally unaffected by this (unless his/her income is over a million or so).

Actually, better a $10k deduction not affected by the AMT (individual AMT remains but at much higher thresholds) than a $50k deduction all taken away by the AMT.

I can't believe no fear-mongering 'pay-your-fair-share' (unless it's me paying) article mentions that.